Poland, the Czech Republic and Hungary, the largest countries joining the European Union on May 1, must overhaul public finances

Poland, the Czech Republic and Hungary, the largest countries joining the European Union on May 1, must overhaul public finances, which remains the main obstacle in their bid to catch up with Western Europe and use the euro, the European Bank for Reconstruction and Development said. Poland, the largest of 10 entrants, will post the highest deficit at 7.6 percent of gross domestic product, from 6.9 percent, or more than twice the 3 percent required in countries seeking euro adoption, the EBRD said in a report. It expects 6.2 percent in the Czech Republic and 4.5 percent in Hungary. EU entrants must bring down their deficits to less than 3 percent of gross domestic product and slow inflation to Western European levels to qualify for the euro. The entry of Poland, the Czech Republic, Hungary, Slovakia, Lithuania, Latvia, Slovenia, Estonia, the Greek half of Cyprus and Malta next month will create a borderless union of 450 million consumers stretching from the Atlantic to Russia. The entrants' combined GDP, about the same size as the Netherlands, will make up less than 5 percent of the EU's 9 trillion-euro ($10.8 trillion) gross domestic product. The EU will spend billions of euros on farm aid, road construction and environmental upgrades in the new members through 2006. While the entrants will keep outpacing Western Europe, the immediate effect of membership on economic growth is difficult to quantify, the EBRD said.